“A large part of provident fund investments are in the Rs 50,500 crore assets,” the source said, adding, “..and they are likely to take a significant hit, as they will get their money only after secured lenders have been paid off"
Financial institutions that have lent money to IL&FS group companies could be collectively staring at a write-off of nearly Rs 30,000 crore, a source told Moneycontrol.
That is because Rs 65,000 crore of the outstanding loans are to IL&FS groups classified in the ‘red’ category, according to a progress report presented to the National Company Law Appellate Tribunal (NCLAT) by the Ministry of Corporate Affairs (MCA) and the new board led by veteran banker Uday Kotak. This grading denotes companies which cannot meet their payment obligations towards even senior secured financial creditors as and when such obligations become due.
These entities can only make payments necessary to maintain and preserve the 'going concern' status.
According to the FY2018 balance sheet, IL&FS had around Rs 91,000 crore of debt.
"Out of Rs 65,000 crore, barely Rs 30,000 crore can be recovered,” the source told Moneycontrol.
The assessment has been made on the basis of a solvency test formulated by the new board and MCA.
Entities which can repay all debt obligations and have not defaulted so far account for just Rs 6,605 crore of loans.
Around Rs 50,500 crore of loans are to entities which cannot meet operational and senior secured financial debt, and Rs 15,000 crore of loans are to entities that are unable to repay even senior secured financial debt obligation as and when due.
“A large part of provident fund investments are in the Rs 50,500 crore assets,” the source said, adding, “..and they are likely to take a significant hit, as they will get their money only after secured lenders have been paid off."
Around Rs 16,800 crore of loans is to companies which are not able to meet all obligations (financial and operational), but can meet operational and senior secured financial debt.
This week, ex-Supreme Court judge Justice DK Jain will also meet the new board of IL&FS and oversee the process of the sale of IL&FS companies.
According to the report submitted to the NCLAT, monetisation process for assets with an embedded debt of Rs 35,000 crore has been initiated. The monetisation of another set of assets with Rs 15,000 crore of embedded debt will be initiated in the next 4-6 weeks.